ECB raises rates for tenth time in a row: 25 basis points to 4.50%, highest level in 20 years

BCE Sept 2023 4

CdM| The market had given a 70% probability that the ECB would raise +25 bps at yesterday’s meeting, and it happened. The Governing Council of the European Central Bank (ECB) decided to raise interest rates by 25 basis points, so that the reference rate for its refinancing operations will stand at 4.50%, while the deposit rate will reach 4% and the lending rate will be 4.75%.

With this tenth consecutive increase in the price of money, which has now reached its highest level in more than 20 years, the ECB continues to tighten monetary policy.

With the quarter-point hike announced by the ECB on Thursday, in line with the one adopted in July, the ‘Guardian of the euro’ has raised the price of money by 450 basis points during the current hiking cycle, which began in July last year.

The ECB’s decision comes after the year-on-year inflation rate in the euro area decelerated in July to 5.3%, two tenths of a percentage point below the price increase recorded in June and its lowest level since January 2022.

Excluding the impact of energy and food, alcohol and tobacco, the underlying rate remained stable at 5.5%.

A week ago, Eurostat also reported that gross domestic product (GDP) growth in the euro area contracted by 0.1% in the second quarter of 2023, the same figure as in the first quarter of the year.

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